In a sellers’ real estate market when there are few homes available and a large pool of ready and willing buyers, many of those buyers get left in the dust. It’s aggravating to fall in love with a home only to learn that there are several other offers on the seller’s table. Competition, in this instance, isn’t healthy. Just because someone else got his or her feet in the door first doesn’t necessarily mean it’s a done deal. There are many potential pitfalls on the road to closing that may just derail that particular transaction. If you make a backup offer, you’re in prime position if that comes to pass.
What you need to know about the backup offer
A backup offer puts you in line to buy the home should the primary offer fall over. W e’ll get into some of the reasons this might happen in a moment. A backup offer is a binding contract (an offer to purchase), once all parties accept and sign it, so ensure that you are approved for the amount you’re offering and fully prepared to follow through on the purchase. If the seller’s current buyer backs out for any reason, your offer is already accepted, so there is no renegotiation. Make sure that when you submit the backup offer you’ve included all contingencies that are important to you, such as one for approval of the home inspection. So, why might a sale fall through, leaving a great big opening for you to step into? Let’s take a look at some of the most common hazards.
Many buyers don’t understand that most pre-approved home loans are still conditional. This is done to assure the bank that none of the borrower’s financials have changed, and that the type of property to be purchased is suitable and not high risk. Any change, whether it is a new job, loss of a job, piling up debt on a credit card, may result in the buyer’s mortgage being denied – even at the last minute. Naturally, if this happens, your backup offer automatically steps up to the primary position.
If the buyer in first position is obtaining a mortgage, the bank will want the home appraised to ensure that it isn’t lending more money than the home is worth. If the appraiser determines that the home is worth less than he or she offered, it will deny the mortgage. In this case, the buyer can dispute the appraisal, request that the seller lowers the price, opt to pay the difference between the offering price and the appraised value in cash, negotiate with the seller to pay half of the difference or walk away from the deal. Again, if he or she walks, you win. But, keep in mind that your bank’s appraiser may also come in lower than the asking price, so think about the aforementioned options.
Problems with the home inspection results
The home inspector is responsible for pointing out problems in the home that are visible. In other words, he or she cannot tell a homebuyer what’s lurking under the floorboards or behind walls. Most professional inspectors take their jobs quite seriously and will note even the smallest of details, however. Large photos of a small crack in a wall can be alarming to some buyers, and larger problems may cause the entire deal to fall apart.
Buyer’s home sale falls over
Many homebuyers are also home-sellers and create a contingency in the purchase agreement that states the purchase is based on the successful sale of their current homes. It’s a tricky process – trying to time the sale of one home to purchase another – and it frequently causes the death of the purchase. Their loss, however, is your gain as you will move into the first position. Backup offers don’t always get the home, but some of them do. If you love the house, you should consider submitting one, and I can help you with every aspect of putting a back up offer together.
About the Author: The above article on Lose out on the Home of your dreams? Don’t hesitate to make a backup offer was written and provided by Brent Palmer, a local leader in the field of Richmond and Nelson Real Estate sales, marketing, advanced technology for home selling, and social media.
You can contact Brent Palmer here, or at 027 544 9921. He has helped many people buy and sell homes in the Nelson, Stoke and Richmond areas for years, and would love the opportunity to help you as well.
Thinking of selling your home? I have a real passion for helping people sell their homes in our Nelson and Tasman Region, as well as the marketing, social media & advanced technology for home selling that goes along with it. I’d love to have the opportunity to sit down with you discuss how we can work together to get you the best price.
I help people buy and sell real estate in the following Nelson and Tasman towns & neighbourhoods: Wakefield, Brightwater, Hope, Appleby, Redwood Valley, Mapua, Stoke, Tahunanui, Atawhai and of course, Richmond and Nelson City.
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